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BY: KELLY A. NEAVEL, ATTORNEY
CASEY MCINTOSH, PARALEGAL, researched and contributed to these articles.
Once again, forms were a hot topic at the California Association of REALTORS® (C.A.R.) Fall Business Meetings in Anaheim. This year there are 43 new and revised forms set to be released on November 26, 2012. While C.A.R.’s website has a list and brief overview of these forms, below is a more comprehensive review of the new and some of the revised forms that may be of importance or interest.
In response to the ever-changing climate of real estate transaction, C.A.R. created the following 15 new forms for release in November:
The two (2) new agent broker forms:
Additional Agent Acknowledgment and Additional Broker Acknowledgement: These two forms are addendums to the California Residential Purchase Agreement (RPA). They acknowledge that both the buyer and seller understand there are two agents from the same company or two brokerages working on the transaction and when one licensee/broker is named in a document, the other licensee/broker is also deemed to be named.
The next five (5) forms were derived from the Purchase Agreement Addendum:
Assumed Financing Addendum: This form is used if the Buyer will be taking over the Seller’s existing loan. This addendum to the RPA gives both the buyer and seller specific deadlines by which to have documents to the other person or to the lender. It also acknowledges that the assumed financing is a contingency of the RPA.
Back-Up Offer Addendum: This addendum to the RPA or Counter Offer indicates what position the potential Buyer’s back-up offer is in, as well as the terms of that back-up offer, including time periods.
Court Confirmation Addendum: In certain instances, such as bankruptcy, probate, guardianship, or receivership, the purchase of real property may require ratification by the Court. In such cases, this form has been drafted to provide deadlines and recommendations to the buyer.
Seller in Possession Addendum: This form was created to define the terms of a seller remaining in the property after it is purchased by the buyer. It is intended for short-term occupancy only (e.g. less than 30 days), otherwise, the Residential Lease After Sale form needs to be used. The SIP does not create a landlord-tenant relationship between the buyer and seller, though. The seller is responsible for the maintenance of the property and continued payment of the utilities (except those specified), in addition to paying an agreed-upon sum for his or her continued possession.
Tenant in Possession: If a property is sold to a buyer with a tenant already in the property, the buyer can agree to take the property subject to the rights of the existing tenants. This form defines the terms of that agreement.
There are three (3) new general forms:
Landlord in Default Addendum: Enacted in September 2012, Senate Bill 1191 amends California Civil Code Section 2924.85. Beginning January 1, 2013 until January 1, 2018, landlords who offer for rent a single-family or multi-family dwelling not exceeding four units who have received a notice of default on the property that has not been rescinded, must disclose the default to potential tenants prior to executing a lease agreement for the property. If the landlord violates these provisions, the tenant is entitled to void the lease. If the tenant chooses to void the lease and vacate the property, he or she is entitled to recover from the landlord either one month’s rent or twice the amount of actual damages, (whichever is greater), as well as any prepaid rent. However, the tenant may also elect to stay in the property and honor the lease, in which case he or she is entitled to deduct a total amount equal to one month’s rent from future rent obligations.
The written notice to the tenant must state as follows:
The foreclosure process has begun on this property, and this property may be sold at foreclosure. If you rent this property, and a foreclosure sale occurs, the sale may affect your right to continue to live in this property in the future. Your tenancy may continue after the sale. The new owner must honor the lease unless the new owner will occupy
the property as a primary residence, or in other limited circumstances. Also, in some
cases and in some cities with a “just cause for eviction” law, you may not have to
move at all. In order for the new owner to evict you, the new owner must provide you
with at least 90 days’ written eviction notice in most cases.
Lastly, a property manager is exempt from l ability for failing to provide the written
disclosure notice unless the landlord notified the property manager of the notice of default and directed him or her in writing to deliver the written disclosure to the tenant.
In compliance with the new regulations imposed by Senate Bill 1191 and Civil Code Section 2924.85, the California Association of REALTORS® created the Landlord in Default Addendum to be provided to potential tenant prior to signing the lease.
Parking & Storage Disclosure: For a property located in a multi-unit building, this form serves as a sort of disclaimer and acknowledgement. The form states that the governing documents for the Property must contain a description and drawing of all assigned parking and storage spaces. However, these drawings may not be accurate and there may be differences between the drawing and physical locations of the parking spaces and storage areas. By signing the form, the Buyer acknowledges that he or she has personally inspected the parking spaces and storage areas and, if any discrepancies or issues exist, they are not material to the purchase. This form is also made in connection with the RPA.
FHA/VA Amendatory Clause: This form is to be used as an addendum to the RPA in accordance with HUD/FHA or VA requirements. Essentially, the form states that the Buyer will not incur any penalty through loss of his or her deposit nor will he or she have to complete the purchase should the property not appraise for the amount listed on the form. This is important when the Buyer is making use of a FHA or VA loan since HUD will only insure up to the appraised amount. Pursuant to the form, it is up to the buyer to satisfy him- or herself that the price and condition of the property are acceptable.
There are two (2) new listing forms:
Trust Listing Agreement/Vacant Land Listing Agreement: The Trust Listing Agreement is similar to the standard Listing Agreement with the exception that the “seller” is the trustee of the trust that is listed. The signature line also reflects that the property is being sold by the trust. The Vacant Land Listing Agreement has been separated from the Commercial, Residential, and Vacant Land Listing Agreement and made into its own form.
There are three (3) new signature forms:
Power of Attorney Signature Addendum: This addendum to the RPA identifies a person who has the ability to sign a contract for the sale or purchase of real property as that individual’s Power of Attorney. However, it is important to note that the Power of Attorney must already have been prepared and executed prior to the use of the Addendum.
Probate Signature Addendum: Much like the Power of Attorney Signature Addendum, this form identifies who can sign a contract for the sale of real property on behalf of an estate pursuant to the Probate Code.
Trust Signature Addendum: The last signature form is the Trust Signature Addendum which is used to identify the person who can sign a real estate contract under the authority of a Trust.
In addition to the 15 new forms, there are also 28 forms that C.A.R. has revised for November release, including the Residential Listing Agreement, Transfer Disclosure Statement, and Buyer Representation Agreement. Below is a short description of three (3) forms worth noting:
Commission Agreement: This form has been revised to include a date by which the Principal must accept an offer in order to be compensated.
Contingency for Sale or Purchase of Other Property: This form mainly affects Residential Purchase Agreements or Counter Offers where the purchase of the seller’s property is contingent on the sale of the buyer’s property or the seller’s purchase of a replacement property. The form has been revised from the 2008 version to clarify a buyer’s and seller’s rights should the property at issue fall out of escrow.
Short Sale Information Advisory: In July 2012, Senate Bill 1069 was enacted, effectually
expanding California’s Anti-Deficiency Protections. In California, many mortgages are non-recourse loans, meaning if a borrower’s real property is underwater and he or she defaults, the lender cannot pursue the borrower for any deficiency that results. However, if the borrower were to refinance, the resulting loan may not be non-recourse and the lender may be able to pursue the borrower should he or she default and the lender not receive the full amount of the loan. SB 1069 amends Code of Civil Procedure Section 580b to state that no deficiency judgment shall lie on any loan, refinance, or other credit transaction which is used to refinance a purchase money loan, or subsequent refinances of a purchase money loan, except under certain, specified circumstances. These provisions would apply to credit transactions executed on or after January 1, 2013.
In compliance with the revisions to Code of Civil Procedure Section 580b, C.A.R. also
revised Section 4 on the Short Sale Information Advisory, which advises not only regarding the short sale process but also alternatives to short sales. As a real estate practitioner, it is important to remember that you cannot and should not give advice regarding short sales. If a buyer or seller you are representing has questions about the process, be sure to refer him or her to competent legal counsel for advice. As with any of the forms used in a real estate transaction, do not risk your license simply because you “think” you know the answer.
As mentioned above, C.A.R. provides a quick summary chart of all of the revised forms being released in November.